After years of trying to rein in persistent overproduction by European farmers, the European Commission is now seeking to free farmers to respond to the skyrocketing global food prices and low stocks.

The Communication document produced by the EU analyses structural and cyclical factors and proposes a three-pronged policy response, including short-term measures in the context of agricultural policy and in the monitoring of the retail sector; initiatives to enhance agricultural supply and ensure food security including the promotion of sustainable future generations of biofuels; and initiatives to contribute to the global effort to tackle the effects of price rises on poor populations.

Commission President, José Manuel Barroso, believes the EU has come up with swift and suitable plans to combat the issue. “The European Union has reacted rapidly to the sudden surge in food prices,” he declared. “We are dealing with a problem that has many root causes and many consequences. So we need to act on several fronts at the same time to address them.”

Food price drivers

The EU claim prices have been escalating for four main reasons: increased demand for food amongst a growing global population, increased energy costs, a slowing in global crop yields and new uses for agricultural outputs (e.g. biofuels). Other temporary factors mentioned by the EU include: poor harvests in a number of regions of the world, a historically low level of stocks, the depreciation of the US dollar, export restrictions in a number of traditional suppliers to the world market. Further, speculators have amplified the underlying price volatility.

The EU anticipates prices to continue their decline from their highs before a stabilisation in markets is reached – the low prices of the past, however, are not expected to be seen again.

Biofuels

In 2007, the European Council fixed the target for biofuels for transport, and in January 2008 the Commission made its proposals to implement it. The proposal was to reach 10 per cent but not at “any price” according to the EU. The target is conditional and requires a workable and robust sustainability scheme, and commercial viability for second generation biofuels. This EU sustainability scheme, reportedly the first of its kind in the world, is currently under discussion at the Council and the European Parliament. The scheme hopes to ensure that production will not have damaging side-effects and will to be robust and enforceable.

The discussion of biofuels has turned into a heated debate this year but it appears that a further increase in biofuels production is guaranteed. However, the EU believes the sustainability scheme could ensure a rapid transition to the new generation of biofuels and show that sustainability can in the industry can be achieved.
Immediate changes to Agricultural Policy

The European Commission plans to further modernise, simplify and streamline the Common Agricultural Policy and remove remaining restrictions on farmers to help them respond to growing demand for food. The CAP Health Check will further break the link between direct payments and production and thus allow farmers to follow market signals to the greatest possible extent.

The Commission also proposes an increase in modulation, whereby direct payments to farmers are reduced and the money is transferred to the Rural Development Fund. The funding obtained is expected to be used by Member States to reinforce programmes in the fields of climate change, renewable energy, water management and biodiversity.

“The Health Check is all about freeing our farmers to meet growing demand and respond quickly to what the market is telling them, “said Mariann Fischer Boel, Commissioner for Agriculture and Rural Development. “It also aims to simplify, streamline and modernise the CAP and give our farmers the tools to handle the new challenges they face, such as climate change.”

The Communication document will be discussed at the European Council on 19-20 June, as they seek to mitigate the effect of rising food prices. With the recent US Congress farm bill attacked, due to claims it does nothing to help alleviate global concern about food, the world is hoping the powerful EU will be able to quell global fears in the coming months.

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